(a) Qualifications and safeguards. The following procedures apply
to a state member bank that controls or holds an interest in a financial
subsidiary.
(1) Notice by Board. If the Board finds that a state member bank
or any of its depository institution affiliates fails to continue
to be well capitalized and well managed or the state member bank is
not in compliance with the asset limitation set forth in section 208.71(a)(2)
or the safeguards set forth in section 208.73(c), the Board will notify
the state member bank in writing and identify the areas of noncompliance.
The Board may provide this notice at any time before or after receiving
notice from the state member bank under paragraph (a)(2) of this section.
(2) Notification by state member bank. A state
member bank must notify the appropriate Reserve Bank in writing within
15 calendar days of becoming aware that any depository institution
affiliate of the bank has ceased to be well capitalized and well managed.
The notification must identify the depository institution affiliate
and the areas(s) of noncompliance.
(3) Execution
of agreement. Within 45 days after receiving a notice from the
Board under paragraph (a)(1) of this section, or such additional period
of time as the Board may permit—
(i) the state member bank
must execute an agreement acceptable to the Board to comply with all
applicable capital, management, asset, and safeguard requirements;
and
(ii) any relevant
depository institution affiliate of the state member bank must execute
an agreement acceptable to its appropriate federal banking agency
to comply with all applicable capital and management requirements.
3-384.1
(4) Agreement requirements. Any agreement required
by paragraph (a)(3)(i) of this section must—
(i) explain the specific
actions that the state member bank will take to correct all areas
of noncompliance;
(ii) provide a schedule within which each action will be taken; and
(iii) provide any
other information the Board may require.
(5) Imposition
of limits. Until the Board determines that the conditions described
in the notice under paragraph (a)(1) of this section are corrected—
(i) the Board may impose any limitations on the conduct or activities
of the state member bank or any subsidiary of the bank as the Board
determines to be appropriate under the circumstances and consistent
with the purposes of section 121 of the Gramm-Leach-Bliley Act, including
requiring the Board’s prior approval for any financial subsidiary
of the bank to acquire any company or engage in any additional activity;
and
(ii) the appropriate
federal banking agency for any relevant depository institution affiliate
may impose any limitations on the conduct or activities of the depository
institution or any subsidiary of that institution as the agency determines
to be appropriate under the circumstances and consistent with the
purposes of section 121 of the Gramm-Leach-Bliley Act.
(6) Divestiture. The Board may require a state member bank to divest
control of any financial subsidiary if the conditions described in
a notice under paragraph (a)(1) of this section are not corrected
within 180 days of receipt of the notice or such additional period
of time as the Board may permit. Any divestiture must be completed
in accordance with any terms and conditions established by the Board.
(7) Consultation. The Board will consult with
all relevant federal and state regulatory authorities in taking any
action under this paragraph (a).
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(b) Debt-rating or alternative requirement. If a state member bank does not continue to meet any applicable
debt-rating or alternative requirement of section 208.71(b), the bank
may not, directly or through a subsidiary, purchase or acquire any
additional equity capital of any financial subsidiary until the bank
restores its compliance with the requirements of that section. For
purposes of this paragraph (b), the term “equity capital” includes,
in addition to any equity instrument, any debt instrument issued by
the financial subsidiary if the instrument qualifies as capital of
the subsidiary under federal or state law, regulation, or interpretation
applicable to the subsidiary.
